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tv   Nightly Business Report  PBS  July 31, 2010 12:00am-12:30am PST

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>> tom: "weak," "sluggish," "anemic"-- those are the words economists are using to describe how slow the economy grew over the past three months. >> moreover, at 2% growth, we're really not making serious inroads into the unemployment crisis that we currently have. >> susie: so what does this mean for people looking for work and businesses trying to grow? you're watching "nightly business report" for friday, july 30. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening, and thanks for joining us. the u.s. recovery lost momentum this spring, susie. that came as consumers spent less and imports surged. >> susie: tom, "sluggish" is the best way to describe growth in the second quarter: the gross domestic product, or g.d.p., slowed to an annual rate of 2.4%. that's down from a revised 3.7% in the first quarter, but on the positive side, this is the fourth straight quarter of growth. >> tom: the smaller g.d.p. figure was balanced by a big
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jump in midwest business activity. the chicago purchasing managers index marked its 10th straight month of expansion, up to 62.3. any number over 50 signals growth. today's numbers highlight the cross currents in the economy, and whether growth will be strong enough to drive down unemployment. suzanne pratt takes a look at what analysts say lies ahead for the u.s. economy. >> reporter: on the surface, the economy growing at a rate of 2.4% doesn't sound so bad. after all, consumer spending in the second quarter was only slightly weaker than the first quarter. on top of that, businesses bought up equipment and software at a blistering pace. the problem is the recovery is slowing down, just as government support is fading. and, that has some economists, like brian fabbri, concerned about the future. >> it really looks like a 2% growth story for the second half of the year. a little bit disappointing compared to where we have come
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from-- 5%, for example, in the fourth quarter and 3.7% in q1. so, it's a little disappointing. moreover, at 2% growth, we're really not making serious inroads into the unemployment crisis. >> reporter: and there lies the crux of the problem. the economy needs to grow at a much faster clip to make companies feel comfortable about hiring. experts estimate it takes about 3% growth in g.d.p. to create enough jobs just to keep up with the increase in population. nevertheless, other economists, like daiwa securities' mike moran, see little chance of a double dip recession. >> i do not think the recovery is in jeopardy. we are getting good support from businesses with their capital spending. the consumer right now is cautious and not spending vigorously, but i don't look for the consumer to pull back from where we are right now. >> reporter: moran also says, even though the economy will be growing in the months ahead, that growth will feel feeble to most americans, particularly by historical standards.
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>> usually in the early stages of an economic recovery, we have a burst of growth. there is pent-up demand, there's lots of activity from consumers and businesses. we're not seeing that this time. >> reporter: we also learned today from new government data that the recession was worse than first thought. that's probably no surprise to people on the street, but it does suggest the economy has to climb out of a much deeper hole. suzanne pratt, "nightly business report," new york. worries about the recovery kept wall street in check. stocks end the week little changed. the dow fell a point, the nasdaq gained three, and the s& s&p 500 was flat. volume on both the big barrels of oil a day and the nasdaq fell from yesterday's pace. consumers are still feeling uneasy about the economy. the consumer sentiment index crept higher than
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expected in july, but it is still at its lowest level in six months. and greece's military will end a trucking strike that has led to wide-spread fuel shortages on the island. truckers are protesting top new austerity measures adopted in response to greece's debt crisis. >> tom: you may own the land, but not what is under it. pitting neighbor against neighbor in the rush to cash in on natural gas. >> susie: president obama defended his decision to rescue g.m. and chrysler at two campaign-style rallies in michigan today. the president said letting the auto industry fail would have cost up to a million jobs, spreading pain across the country. taxpayers are still expected to lose more than $24 billion on the government's investments, but the president pointed to recent industry profits and 55,000 new auto industry jobs as evidence he made the right call. >> so today, this industry is growing stronger.
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it's creating new jobs. it's manufacturing the fuel- efficient cars and trucks that will carry us to an energy independent future. you are proving the naysayers wrong, all of you. >> susie: next month, g.m. is expected to file for a new initial public offering of stock, a little more than a year after it emerged from bankruptcy. >> tom: late today, the house of representatives voted to end the federal moratorium on deepwater drilling as long as oil companies meet new safety requirements. the move is an amendment to a broader energy bill working its way through the house. the six-month moratorium was put in place after the b.p. oil disaster. it is set to expire in november and bans exploratory drilling in waters more than 500 feet deep. >> tom: b.p.'s incoming c.e.o. is getting some help in the gulf. robert dudley today announced the hiring of former fema director james lee witt. witt will oversee cleanup of the company's macondo well disaster and long-term restoration efforts in the gulf of mexico.
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separately, with oil no longer spilling out of the well, b.p. said it will pull back some cleanup crews from the area. but, dudley stressed, there's no pullback in b.p.'s commitment to gulf restoration. >> susie: meanwhile, china struggles to clean up its own oil spill-- its worst ever. environmental group greenpeace said the spill may be 60 times bigger than the chinese government first said. greenpeace recorded these images, and its experts say the spill dwarfs the exxon valdez disaster. as many as 90 tons of crude may have leaked into the yellow sea since the massive pipeline explosion two weeks ago. the disaster happened near the port of dalian, the site of one of china's strategic oil reserves.
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a lot of issues, and so the weekended with kind of a whimper. >> tom: and let's not forget about the big "e," lots of earnings. let's take a look at tonight's marke "market focus." >> tom: the market really marked time this week, as investors digested lots more earnings. for the week, the dow industrials were up 0.4%. it is the only major index to be higher tonight than a week ago. the nasdaq slipped 0.7% thanks
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to the mid-week weakness, and the s&p 500 inched lower by just 0.1%. a third of the third quarter is in the books. july was the best month for shareholders in the past year. all three of the major indices were up 7%. the economically sensitive material and industrial stocks have provided the biggest push, both sectors posted double-digit gains this month. all 10 of the major sectors are up this quarter. health care was the laggard. what's interesting is that, so far this earnings season, health care has provided the second- best performance, with more than 80% of companies reporting better-than-expected earnings. >> tom: today, it was drug giant merck, which bought schering- plough back in november. forgetting about the costs of integrating the two companies, merck's bottom line was better than expected. the schering deal helped merck almost double its revenues compared to last year. but, that didn't help shareholders today. it was the second-worst- performing dow industrial component today, slipping almost 2%.
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while we're talking about the pharmaceutical business, biotech geron said the food and drug administration is allowing early stage testing on experimental stem-cell therapies. geron is working on a new spinal cord injury treatment using embryonic stem cells. between the f.d.a. news and losing less money last quarter than it did a year ago, the stock soared more than 17% on huge volume. shares were at a new low earlier this month. and in the three way fight for a new weight loss drug, orexigen announced patients using its experimental drug were more likely to lose weight than those on a placebo. orexigen jumped almost 10%. its medicine goes before an f.d.a. advisory panel late this year. arena pharmaceuticals treatment will be assessed this fall. the advisory panel already rejected vivus' treatment. intel shares were weak all day, but dropped in the final half hour of trading. here are the last 90 sessions. just before the closing bell, the "wall street journal" reported intel appears close to buying germany's infineon technologies.
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that would give intel a bigger play for smartphones' semiconductors. standouts today can trace the action back to their bottom lines. telecom equipment maker alcatel lucent is close to a three-month high after better-than-expected earnings. fruit company chiquita also is close to a three-month high with improving profits in europe. auto safety systems maker federal signal fell 13%, saying near-term expectations have been tempered by the economy. and life insurer genworth was hit by disappointing growth. we saw a trio of new stocks hit the market this week. chesapeake mid-stream is a natural gas partnership. its initial price was $21. envestnet provides online investment tools for money managers. it started at $9. and rare earth miner molycorp processes minerals used in wind turbines, fiber optics and other technologies. it hit the street at $14.
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and that's tonight's "market focus." >> susie: northern michigan is seeing dollar signs. last night, we told you how big energy companies are spending big money on mineral rights leases to drill for natural gas. but, as diane eastabrook reports, one landowner's dream could turn out to be another landowner's nightmare. >> we own all the way up to the pines...
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>> reporter: buried beneath sherry wood-stieg's farmland could be the goose that laid the golden egg. shale runs under most of northern michigan and some of it could be rich with natural gas that energy companies couldn't get to, until now. that's why wood-stieg got this offer from an oil company to lease the mineral rights under her land for $21,000. it's money this nurse practitioner and part-time farmer could definitely use. >> money is hard, it's tight, and when somebody is throwing around $20,000, $30,000, up to $200,000 for leases-- no offense but it goes to my budget really good. >> reporter: oil and natural gas drilling have been a part of michigan's landscape for nearly a century. over the years, the state and its residents have reaped millions of dollars in bonuses and royalties for mineral rights leases. the latest natural gas boom could bring even bigger windfalls, but it could also bring big problems. >> leasing mineral rights in michigan is a little more complicated than it is in other states, because here property rights and mineral rights are
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severed. in other words, i may own this parcel of land, but someone else may own the minerals that lie several hundred feet beneath my feet. >> reporter: jim clements is a title examiner. he's at the osceola county register of deeds scouring old documents to figure out who owns what in the area. he says, during the depression, many landowners sold their mineral rights to texas oil barons. >> so, if i was a property owner back in the 1930's and maybe i sold my mineral rights outright to another company, that company may or may not still own those mineral rights. if they've provided a notice under the michigan dormant minerals act then, yeah, they could still own them and in fact many still do. >> reporter: attorney david porteous says a surprising number of people buy property in michigan and have no idea they don't own the mineral rights under their land. >> i've seen may occasions where somebody looks out their window in the morning-- they're having a cup of coffee-- and they see somebody with a survey marker pounding some stakes in their
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ground. and they go out and they ask them, and the person says "well, we're getting ready to clear a location to drill an oil well." and then the landowner finds out that maybe they don't own the minerals, and frankly, there is very little that they can do about it. >> reporter: michigan also has something called compulsory pooling. it means if you don't want drilling or production on your property, but everybody around you does, the state can twist your arm. farmer larry gingrich says he was forced to have a nat gas processing station built on his land. the facility's been here more than a decade, and he's still steamed about it. >> it just sets here. i lost five acres of ground. yeah, i get a little bit of a lease, but if i had my choice i just as soon that it ain't here. it don't mean nothin' you know. >> reporter: some fear another natural gas boom could pit neighbor against neighbor. the haves against the have-nots. wood-stieg and her son, jake, have tended this land all of their lives and own their mineral rights. they understand the trouble that could come with more drilling,
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but they also think it could bring relief to a financially- strapped region. >> anytime you can get money back and put it back into our local economy, it's going to improve everything overall. >> reporter: diane eastabrook, "nightly business report," hersey, michigan. >> susie: monday, we continue our coverage of natural gas drilling and shale gas recovery. the technology used to extract that gas is called "fracking," and environmentalists are concerned it could pollute groundwater and cause other unintended consequences. >> tom: here's what we're watching for next week. our friday "market monitor" guest is mary ann bartels, head of u.s. technical and market analysis, bank of america/merrill lynch global research. we'll see the july reports on auto sales and employment. monday, we kick off our three- part series, "rules of the board," looking at what shareholders should expect a board of directors to know. >> susie: miramax films no longer has a room in the "house of the mouse." disney plans to sell miramax to
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investment group filmyard holdings. the price tag is $600 million dollars; it includes the studio's film library and hits like "chicago" and "pulp fiction." miramax was considered the industry's top independent studio in 1993, when disney paid $80 million for it. founders harvey and bob weinstein left disney in 2005 after disputes with the management. >> tom: the tax man cometh, but his collections are down. despite having a beefed-up staff, the internal revenue service collected less money last year, according to a new report from the treasury inspector general. total i.r.s. revenue fell by almost 15%, to more than $2 trillion. the agency faces challenges, including a growing number of taxpayers with complex financial holdings and increasingly complex audits.
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>> tom: the economy is catching its breath before taking another leg up-- so says tonight's "market monitor." he's marshall front, chairman and chief investment officer at front barnett associates with about $500 million under management. he joins us from the c.m.e. group. >> welcome back to nbr. >> thanks, tom. >> tom: we awe the second quarter gross domestic products, and how do that figure with how
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your putting no the stock market. >> the numbers were a bit disappointing to some people, but for those watching the data playout, it should have been no surprises. we're more interested in no what happened the last quarter, but what is going to happen the next couple of quarters. and forward-looking economic data, institute and supply management numbers remain well in expansion territory, and indicators that we look at and find very interesting in the open market, such as stock prices up 7% in the month of july. the decline in gold, which means global fears are receding. and most particularly the baltic dry index, tom, which is a measure of global activity, as we see it, going forward. the baltic dry index is now up 12 times in the last 12 days and had about an 18% move up. we think it is a good idea of future global
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industrial economic activity. >> tom: you're out there looking at all of those cargo ships worldwide. with that in mind, we saw a 7% rise in july. should shareholders expect that in the months ahead. >> i wouldn't expect 7% in any month. it is really a big surprise to all of us. following the 16% drop that we saw in the prior couple of months. but recall that we came off of a period where we were going to see, according to some experts, a significant decline in economic activity in europe because of the sovereign debt crisis. it doesn't like look that is going to materialize, and so we continue to think industrial companies, economically sensitive companies, if you will, are likely to perform well in the period ahead. and we're concentrating capital in those companies. >> tom: six months ago you were in that chair january 15th, and you had five picks, including some of those in the shipping business, like fedex, down 3%, and unpacific, a nice gain by almost 14%. and also you were dabbing
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in technology, cisco and qualcomm each moving lower. qualcomm 21% lower, and taba pharmaceuticals down by 16%. do you still like this group? >> we like the group. i think to some degree the transports had a pullback. they're beginning to move back up again. the technology stocks have been in distribution for the last three months after very good performance in 2009. if you look at the businesses of cisco systems, they're at the heart of the growth at internet commerce, which is growing very rapidly. and qualcomm is well-positioned in the smart phone business. teba has had a recent hiccup, stock prices off because of some concerns in their genetic business. we think this is overblown. this is a company that can grow over 15% a year. >> tom: one minute left, and i want to look at bank
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of america and jp morgan. two of the biggest banks, and they're being impacted in some way, shape or form by financial regulation. what do you like about these two stocks. >> first and foremost, we're longer term investors and we're looking at a couple of years. we see the credit cycle continuing. we don't think interest rates are going up any time soon. in fact, the fed is probably going to stay lower longer than most people think. those are conditions that should make these companies perform well as businesses. valuations are attractive. we see these stocks with the potential of doubling based on normalized earnings two years out. so they look like very good bets to us, particularly if dividend increases are discussed later this year. >> tom: looking for a double, clearly very bullish there, marshall. any disclosures for these companies? >> our clients own and them and we own them as
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individuals. >> tom: he is chief investment at barnett front associates. >> susie: ask people how much they expect to get from social security, and most of them say they're not counting on any benefits when they stop working. a recent "u.s.a. today" poll confirms this, showing three out of five american workers feel that way. tonight's "money file" guest has some thoughts on ways to fund the program. he's eric schurenberg, editor in chief at and editorial director at >> everyone has a favorite plan to make social security financially sound again, and most of them involve putting the hurt on someone. maybe we raise the full retirement age to 70, or hike taxes, but not benefits, for people who earn too much. but there's another way to help close the system's funding gap-- not to close it entirely, but to help-- and it doesn't involve any pain: open the gates to legal immigration, particularly of highly skilled immigrants. why does that help? well, one way to look at social security is as a retirement savings plan into which you deposit not money, but children,
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who grow up to pay social security taxes. problem is, we baby boomers didn't deposit enough kids into the system. at the simplest level, letting in more skilled immigrants would mean more taxpayers and may be a great way to increase job growth overall. foreign-born americans accounted for 25% of technology and engineering startups between 1995 and 2005. in silicon valley alone, immigrants founded more than half the tech companies. far from stealing jobs from native-born american workers, immigrants would help fill talent shortages in industries such as computer sciences, bio- engineering and medicine that americans just aren't entering in sufficient numbers. we know what we have to do to fix social security: we have to cut benefits and raise taxes. but we have to swallow less of that medicine if we once again extend the welcome we used to extend to the worlds best and brightest workers. i'm eric schurenberg. >> susie: finally tonight, people spend millions of dollars
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every year buying t-shirts and caps adorned with the name of their favorite college sports team, but would you buy your electric power from "texas longhorns energy?" we'll see next month, when the university of texas kicks off a six-year licensing deal with champion energy services to market renewable energy under the team's name. the team has long been tops in university brand rankings by the collegiate licensing company. and tom, if texas longhorns energy is a success, there are more than a dozen other states, with de-regulated power markets where team branded energy could be sold, tom. >> tom: susie, perhaps ohio state buckeyes energy or nittany lions energy won't be far behind? >> susie: that's "nightly business report" for friday, july 30. i'm susie gharib. good night everyone, and have a great weekend. you too, tom. >> tom: good night, susie. i'm tom hudson. have a good weekend everyone, we'll see you again next week. "nightly business report" is made possible by:
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this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at >>
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